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Level 1

How to record partial payment from customer due to vendor

Hello,

 

Our company sells custom furniture items that are manufactured by a few different vendors. We require a 50% deposit on the invoice before construction begins. We also are required to pay a 50% deposit to our vendors.

 

Example:

Our PO to vendor: $200

Invoice to customer: $250

50% received from customer: $125

50% owed to vendor: $100

 

What is the correct way to record these deposits from customers? Many of these projects are complicated and can take 2-4 months to complete. I inherited the books in a very disorganized state and currently the deposits from customers are simply being recorded as AR but this is causing a lot of problems.

 

Thanks in advance!

Solved
Best answer 12-26-2018

Best Answers
Highlighted
Level 15

How to record partial payment from customer due to vendor

You have a job for a customer.  Hey pays you a deposit.
Then you order the work done and pay for it.

it is not the customer paying the vendor in accounting,

book the deposit to a liability account and deposit the money.

pay the vendor.

when the vendor ships, you pay the balance and invoice the customer for the full amount, less deposit

create the liability account and a service item for the deposit and link the item to the liability account
Use a sales receipt to record the deposit received, with that deposit item on it

when you invoice the customer
line one your servicei item for what ever it was he ordered
line two the deposit item, qty= -1 (negative one), and the amount of the deposit

View solution in original post

1 Comment
Highlighted
Level 15

How to record partial payment from customer due to vendor

You have a job for a customer.  Hey pays you a deposit.
Then you order the work done and pay for it.

it is not the customer paying the vendor in accounting,

book the deposit to a liability account and deposit the money.

pay the vendor.

when the vendor ships, you pay the balance and invoice the customer for the full amount, less deposit

create the liability account and a service item for the deposit and link the item to the liability account
Use a sales receipt to record the deposit received, with that deposit item on it

when you invoice the customer
line one your servicei item for what ever it was he ordered
line two the deposit item, qty= -1 (negative one), and the amount of the deposit

View solution in original post

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